AWE's part sale of asset
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AWE announced it would sell 50% of its large Ande Ande Lamut oilfield in Indonesia to Santos in exchange for $100m upfront and $88m of costs once the project is approved. The deal, for a total of $188m, values the project at $376m, or $0.72 per share to AWE.
This is an outstanding outcome for AWE, which paid $139m for the oilfield in 2012 (see AWE: shopping for barrels (Speculative Buy – $1.54)) and will realise a significant profit on the sale. We previously estimated that full field development would be worth about $0.50 per share to AWE; that now seems deeply conservative. The introduction of Santos will mean the funding burden, up to $600m for full development, will be shared and is now almost certain to proceed. That Santos is now the project operator imbues further confidence in the project.
AWE will report full year results next week which we will cover in more detail. This is an excellent outcome for shareholders and lends credence to our long standing view that the company’s assets are undervalued. The share price is up marginally since 27 Feb 12 (Speculative Buy – $1.33). SPECULATIVE BUY.
Note: The Growth portfolio owns shares in AWE.
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